Because it must be feminine singular.
Check the first sentence:
Die Generalität ist ein Geschmeiß des deutschen Volkes!
Subject here is “die Generalität”, it’s feminine singular.
Now on to sentence two:
Sie ist ohne Ehre!
As “sie ist” is feminine singular, too, it must refer to “die Generalität” from the preceding sentence.
If you would refer to “das deutsche Volk”, you’d have to go with neuter singular, which would be “es ist”, so obviously no match here.
If it were “sie sind” you’d need something in plural, which can’t be found in the preceding sentence.